Chapter Five
What is the maximum flat fee that a lender may charge for origination on a VA loan? A) 1% B) 2% C) 3.5% D) There is no limit; the fee is negotiable
A) 1%, - The VA considers a 1% flat fee to be the maximum a lender can charge the veteran for origination services, including processing, document preparation fee, etc. These fees are typically charged to the seller and are not considered part of the 1% flat fee if the seller or interested third party pays the costs.
Before closing, the VA (Veterans Association) requires the lender to confirm the veteran qualifies for a loan with a Certificate of Eligibility. A) True B) False
A) True, The lender cannot process a VA-approved loan until the veteran can document his or her military service.
An upfront mortgage insurance premium is required? A) on all FHA (Federal Housing Association) loans B) only when the buyer cannot pay the required down payment in cash C) only when the LTV exceeds 80% D) only when the LTV exceeds 90%
A) on all FHA (Federal Housing Association) loans, - The upfront mortgage insurance premium is required on all FHA loans, regardless of the loan program or LTV.
FHA-insured loans are funded by, A) approved lenders B) the FDIC (Federal Deposit Insurance Corporation) C) the FHA (Federal Housing Association) D) HUD
A. approved lenders. - FHI-insured loans are funded by lenders that are approved by the FHA. The loans are insured by the FHA.
An eligible borrower applies for an FHA (Federal Housing Association) loan on a house with an appraised value of $100,000 and a purchase price of $96,000. What is required minimum investment? A) $3,000 B) $3,360 C) $3,500 D) $4,800
B) $3,360, - The minimum down payment (3.5%) for FHA-insured loans is calculated using the lower of the sale price or appraised value. $96,000 x .035 = $3,360.
What items must accompany every application for a VA-Guaranteed mortgage? Select all that apply: A) Bonus Entitlement Letter from VA B) Current Certificate of Eligibility C) Current Certificate of Reasonable Value D) DD214, NGB22/23, or Statement of Service
B) Current Certificate of Eligibility D) DD214, NGB22/23, or Statement of Service The current certificate of eligibility that shows the amount of guarantee the veteran is eligible for and the DD214, NG 22/23, or Statement of Service showing the veteran's status are both required at the time of application.
Full VA entitlement can generally be restored to a veteran A) if any disabled veteran assumes the loan B) if an eligible veteran substitutes his entitlement for the seller's C) under no circumstances D) when the loan is paid down to below 50% LTV
B) if an eligible veteran substitutes his entitlement for the seller's, - If a seller has an existing VA loan, a buyer with a sufficient amount of entitlement may assume the existing loan on its original terms, with the approval of VA or the lender. When the assumption is approved, the buyer's eligibility is substituted for the selling veteran's eligibility, and the seller's entitlement used for the purchase is restored.
If they meet the lending guidelines, who can qualify for an qualify for an FHA (Federal Housing Association)-insured loan? Select all that apply. A) all non-permanent residents B) non-permanent residents with a qualifying work visa C) permanent residents D) U.S. citizens
B) non-permanent residents with a qualifying work visa C) permanent residents D) U.S. citizens Anyone who is a U.S. citizen, permanent resident, or non-permanent resident with a qualifying work visa, and who meets the lending guidelines, can qualify for an FHA-loan.
A residual income calculation shows the? A. amount of cash flow available for maintenance and utilities. B. cash flow remaining for family support. C. funds remaining for the proposed PITI payment. D. true composite debt-to-income ratio.
B. cash flow remaining for family support. - When the residual is calculated, the amount of cash flow remaining for the veteran to pay for family support (e.g., auto insurance, clothing, food, entertainment, and other debt) is computed. This amount is compared with the residual table to ensure the veteran will have ample monies for the items needed.
The annual area median income for a county is $50,000. Using USDA-guaranteed financing, what is the maximum amount of gross annual income that the borrower can earn and qualify? A) $50,000 B) $55,000 C) $57,500 D) $62,500
C) $57,500, - A borrower using USDA financing can earn no more that 115% of the area median income that is established in the area where the borrower wishes to purchase.
What are the "4 Cs of Underwriting"?
Credit, Capacity, Cash, Collateral
To qualify for an FHA (Federal Housing Association) loan, a borrower should have a maximum housing expense ratio of _________ and a total debt-to-income ratio of _________. A) 28%; 36% B) 29%; 36% C) 29%; 41% D) 31%; 43%
D) 31%; 43%, - According to the 4155.1 FHA's underwriting manual, the debt-to-income ratios for an FHA insured loan are 31% for the housing ratio and 43% for the total debt-to-income ratio.
Which of the following is NOT of of FHA's (Federal Housing Association) "4 Cs" of underwriting? A) capacity to repay B) cash C) credit history D) current interest rate
D) current interest rate, Current interest rates are not used as a basis for underwriting by the FHA: collateral, which identifies the property value, is the 4th C used by the FHA.
Mary wants an FHA loan to buy a house. She would have these monthly expenses: $536.82 Principal and Interest ($100,000 at 5% for 360 months) $ 53.00 Property Taxes $ 25.00 Homeowners Insurance $ 95.83 MIP (FHA Mortgages Insurance Premium based on 96% LTV) +$ 90.00 Homeowners Association Dues $800.65 Total Housing Expense (PITI) What should Mary's required stable monthly gross income be to qualify for this loan?
Dividing the total housing expense by 31%, this loan requires a stable monthly income of $2,582.74 ($800.65 / 0.31 = $2,582.74).
What are the four "Property Guidelines" for FHA (Federal Housing Association) Loans? __________ of the property. __________ of the property. __________ __________ __________ permitted where the property is located. __________.
Eligibility. Condition. Maximum mortgage amount Occupancy.
Mary wants an FHA (Federal Housing Association) loan to buy a house. She would have these monthly expenses: $ 800.65 Housing Expense (from previous example) $ 192.65 Auto Payment +$ 40.00 Revolving Credit Account $1,033.30 Total Debt Based on her debt, what should Mary's required stable monthly gross income be in order to qualify for this loan using the debt-to-income ratio?
FHA allows a maximum debt-to-income ratio of 43% so $1,033.30 / 0.43 = $2,403.02, the minimum monthly income needed. Remember, though, a borrower must qualify under both ratios so $2,582.74 is the minimum monthly income Mary would need to buy this home ($800.65 / 0.31).
"PITI" stands for?
Principle, interest, taxes, and insurance.
